SoftBank’s Thorny Uber Deal

Hi all, it’s Eric. If the Uber-SoftBank deal gets done, it may be one for the record books. With $10 billion changing hands, it could be the largest private stock sale ever. The people involved might remember it for a different reason, however: as the most contentious deal they’ve ever done.

Even calling it the “Uber-SoftBank” deal grossly oversimplifies the situation. There are four major players, along with a largely powerless investor base. Those four parties are Uber, SoftBank and its fellow investors, Travis Kalanick and an investor group led by Benchmark. All four players have different objectives and price isn’t even the central stumbling block.

Here’s my best sense of what they all want.

The co-founder and former chief executive officer wants to keep the door open for some involvement at the company, though it’s hard to tell exactly what role he wants. He’s fighting against Uber’s largest shareholder, Benchmark, in court to maintain control of three board seats. So at the very least, he wants to hold onto his outsized role over Uber’s board of directors.

Kalanick and Uber’s new CEO Dara Khosrowshahi are in regular contact and Kalanick seems at peace with the fact that the company has a new chief. That said, Kalanick understands the company better than anyone and he knows it. It’s hard not to see him wanting at least an advisor role.

How does this fit into the SoftBank deal? Well, the central stumbling block for the deal is over the company’s governance — the board composition, the voting power of shares, etc. Benchmark and its investor group have pushed for terms that would expressly prohibit Kalanick from becoming CEO again or from ever becoming the company’s board chairman or even chair of one of the board’s subcommittees. SoftBank has made verbal commitments to restrict Kalanick’s power, but said in a statement that it hasn’t agreed to “contractual limits.”

Kalanick would certainly like see Benchmark leave the board and its role at Uber.

Khosrowshahi needs to bring order to his company. He’d like a peace accord between feuding shareholders. He’d like to make sure existing employees get a chance to sell some of their shares at a fair price.

Khosrowshahi and Benchmark would like to see the company’s voting structure move closer toward one share, one vote, but doing so would diminish Kalanick’s influence over the ride-hailing company.

I think Khosrowshahi is also well aware that if SoftBank doesn’t invest in Uber it could easily head over to San Francisco’s China Basin and invest in rival Lyft. Or SoftBank could continue to pour money into Uber’s foreign competitors. If Uber is able to get SoftBank as an investor, it could open the door to a truce with SoftBank investments Ola or Grab.

The firm wants to diminish Kalanick’s role in every way possible and this deal is one vehicle to do so. It’s hard to get an honest read on who really wants to sell. Benchmark would sell a percentage of its stake under certain conditions — if it gets guarantees that Kalanick will not be placed into certain leadership roles at the company and as long as some other governance reforms are made. If so, the firm would sell some of its shares at Khosrowshahi’s direction.

The buyers care about getting a good price. (Right now it seems like the secondary deal might start around $45 billion.) There’s a reason that the deal talks started during a time of crisis. There was blood in the water. Rank opportunism. SoftBank’s Masayoshi Son loves a good deal.

SoftBank has also said that it wants a substantial chunk of Uber shares — at least 15 percent. So it isn’t just matter of price, but of making sure that enough shares get on the market so SoftBank can take a meaningful stake.

But there’s one thing everyone wants to know when it comes to SoftBank? Whose side is Masa on? Benchmark’s or Kalanick’s?

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